“The best thing politically is to let Obamacare explode.”

March 25th, 2017

Since his inauguration, President Trump repeated over and over again that he had considered doing nothing on Obamacare, and would simply let the law implode. Now that AHCA is dead, Trump has turned back to his initial sentiment. Whether the ACA was in fact unraveling, or not, when Trump took office is a matter of debate. What is beyond debate, however, is that Trump can accelerate that unraveling. Last night, Trump told the Washington Post that “The best thing politically is to let Obamacare explode.”

This is not a passive process, as Trump can take a series of actions, or abstain from acting, to hasten the law’s demise. Andy M. Slavitt, who served as the Obama Administration’s CMS Chief referred to the President’s prediction as a “a self-fulfilling prophecy.” He added, “That’s like inheriting an overseas war, and deciding you let your own soldiers get killed because you didn’t elect to enter that war.”

How can Trump “let Obamacare explode” to spur Congress to take action?

First, the House of Representative’s challenge to the payment of cost-sharing reductions returns to the fore. Last month, HHS and the House jointly moved to stay proceedings in the D.C. Circuit until May 22, 2017, “to allow time for a resolution that would obviate the need for judicial determination of this appeal, including potential legislative action.” The D.C. Circuit granted that motion. As far as I can tell, the Trump Administration has continued making the payments to the insurance companies since January. I could not find any proof of these payments, though here the dog didn’t bark: if the insurers were getting stiffed, they would be screaming bloody murder. However, if Donald seeks to hasten the unraveling of Obamacare, he could simply direct his Secretary to halt the illegal payments. Margot Sanger-Katz predicts the outcome of that change:

Without the subsidies, all the insurers will lose some money, and many smaller carriers will face bankruptcy. If Mr. Trump does not fight the court case, the Obamacare markets in most states will unravel quickly, leaving millions without insurance options on his watch. Many of the beneficiaries are Trump voters.

Second, Trump could terminate illegal subsidies being provided to members of Congress and their staff. I discussed this strategy on NRO before the inauguration:

. As a result of Grassley’s amendment, members of Congress and their staffers, unlike all other federal workers, would no longer be eligible for the generous Federal Employees Health Benefits Plan (FEHBP). Under FEHBP, the government pays approximately 75 percent of an employee’s annual premium. This annual tax-free contribution of between $5,000 and $2,000 was far more generous than the income-adjusted subsidies available on HealthCare.gov. Indeed, many well-compensated congressional employees—starting with a family of four that earns more than $100,000 a year — would be ineligible for any subsidies on the exchange. Under Grassley’s plan, they would now be put in the same position as other Americans who had to pay the full cost of their insurance, without any governmental assistance.

The Grassley amendment was extremely unpopular on Capitol Hill . . . . However, as the movement to repeal and replace Obamacare grew during July and August, the House GOP leadership abandoned any efforts to modify the ACA, short of total repeal. Where Congress would not act, President Obama did so unilaterally. The Office of Personnel Management (OPM) announced that members of Congress and their staff would be able to purchase health insurance on the District of Columbia’s Small Business Health Options Program, known as the D.C. SHOP exchange. The ACA authorized these new SHOP exchanges to offer a health-insurance marketplace for workers at small businesses with fewer than 50 employees.

At President Obama’s direction, OPM determined that after a congressional employee enrolled on the District of Columbia’s SHOP Exchange, the government could then provide the same 75 percent contribution that was offered under the FEHBP. Thus, there would be no meaningful disruption in benefits for Hill staffers. This is a benefit that no one else on the SHOP exchange would be eligible for. Notwithstanding the Grassley amendment, which expressly sought to put congressional employees on the same footing as all other Americans on the exchanges, now congressional employees would be in the exact same position as they were before the enactment of the ACA. The OPM fix was a blatantly illegal effort to bypass an unpopular law.

Senator Ron Johnson (R., Wis.) challenged the legality of the OPM rule in 2014. “OPM exceeded its statutory jurisdiction and legal authority,” he wrote in the Wall Street Journal. “In directing OPM to do so, President Obama once again chose political expediency instead of faithfully executing the law — even one of his own making.” Article II imposes on the president a duty to “take care that the laws be faithfully executed.” Alas, the federal court dismissed Johnson’s suit, finding that the senator was not injured by the payment of additional subsidies. (Indeed, most of President Obama’s illegal executive actions were shielded in court because parties were not injured and therefore lacked “standing” to challenge them.”)

But now there’s a new sheriff in town. With the stroke of a pen, President Trump can direct his Secretary of the Office of Personnel Management to rescind the old policy: Eliminate all special subsidies for members of Congress and their staff, and force them to buy insurance on HealthCare.gov like all other Americans. But this deal would not be so simple.

This change would not make Obamacare “explode,” but it would blow up the coverage of the people in the best position to effect legislative change. Payback for not supporting the bill?

These first two items, though they would accelerate the unraveling of the ACA, are also legal. Indeed, taking these steps would restore the rule of law, and the President’s duty of faithful execution. I am not confident that such motivations matter to the current administration, but I can hope.

The third approach to make Obamacare “explode” would be illegal–suspend enforcement of the individual mandate and Essential Health Benefit requirements. In short, these actions were purportedly part of the vaunted “Phase 2” of the repeal-and-replace strategy. I discussed these options here:

First, Secretary Sebelius suspended both the individual and employer mandates for millions of Americans and businesses. These actions were completely illegal, and amounted to a failure to faithfully executive the law. Secretary Price could now do the same, on a much larger scale. Everyone who asserts a hardship because of the rising costs of health insurance could now be granted an exemption. Only fools would pay the penalty! Efforts to challenge Sebelius’s suspensions have failed in court. Under these precedents, it is unlikely anyone would have standing to stop Price’s changes. Frankly, I am not too concerned about these actions, because Phase 1 (AHCA) would repeal both mandates in full, so there is little reason to employ further executive action on this front. So those mandates are out.

There is a much more potent approach: Price can do what Sebelius did before, and simply decline to enforce the mandates. The if-you-like-your-plan-you-can-keep-you-plan administrative fix allowed insurance companies to continue selling otherwise void plans, that do not cover EHB. How? HHS simply announced that it would never make the finding that non-compliant plans are being offered. As I discuss in Unraveled, this decision was completely illegal.

By never making the determination that non-compliant plans were being offered, HHS effectively suspended the EHB mandate. It was entirely illegal. (See Nick Bagley’s analysis in the New England Journal of Medicine). West Virginia challenged this action in court. The D.C. Circuit dismissed the case on standing grounds, finding that the state suffered no injury. Like with many of President Obama’s benevolent suspensions that alleviated burdens, courts found no standing.

Alas, using this precedent, Secretary Price can likewise decline to enforce the EHBs–but to a much greater extent. Instead of allowing old, non-grandfathered plans to be sold, the Trump Administration can tell insurance companies that they can sell entirely new thrifty plans that do not cover all EHBs. Why? There is a hardship due to the lack of plans on the exchanges, and HHS determined that selling additional plans are essential as a transitional policy to stabilize markets. Whatever.

Don’t forget: West Virginia’s petition for certiorari is currently pending before the Court, and after a call for a response, the SG filed a BIO  (I think this is the first brief the Trump Administration has filed in support of Obamacare). The case should be up for conference in about three weeks or so. Perversely, a ruling for West Virginia here would enable other liberal states to stop Trump’s executive action with respect to the ACA. More generally, it would bolster the notion of state standing–the virtues of which California and Washington have recently re-discovered. This could gin up four votes for cert that were lacking before. One caveat: Price’s executive action would only work in the states that decline to enforce their own markets. Most liberal states, which enforce their own markets, would not be injured by this change. Perversely, the states most likely to disfavor the policy would be least able to challenge it in court.

Michael Cannon offers a few other lawful steps the President could employ:

End Obamacare’s illegal “reinsurance” payments.

The Government Accountability Office found that the Obama administration illegally diverted additional billions of dollars in “reinsurance” payments from the Treasury to private insurance companies. Trump should immediately stop the diversion of those funds and demand that insurers repay the more than $3 billion in unlawful payments they have received.

Block Big Insurance’s “risk-corridor” raid on the Treasury.

The Obama administration tried to circumvent a statutory cap on “risk-corridor” payments to private insurance companies by offering to settle lawsuits filed by the insurers. Trump should immediately announce that his administration will not settle but will instead vigorously defend taxpayers’ interests in all such lawsuits.

There is a lot President Trump can due to hasten Obamacare’s explosion. This is not a passive process. Each of these actions would destabilize markets, but would force Congress back to the table to negotiate.